October 17, 2008
In recent weeks, Canadian citizens have witnessed the bursting of the financial bubble in New York and London. Stock markets, banks and insurance companies etc. have been affected the world over. It happened because “heads were buried in the sand”. The bubble would not burst they insisted, but it did. The blame game is now underway.
Well, Ontario municipalities are living under a similar financial bubble and even though I and others have been warning of this for several years now, the powers to be have had their “heads in the sand”. The media has paid lip service to the unfolding events by simplistically pointing out the need for more municipal revenue. What we really need is more direct control of municipal wages and benefit costs and productivity enhancements.
Total Ontario municipal revenues have been increasing at a healthy annual average of near 6 percent while the Ontario population growth for the majority of municipalities (there are some notable exceptions like Barrie and Guelph) was in the 4 percent range over the period 2001-2006. That’s less than 1 percent a year. So if the population was growing at a snails pace, where did all the revenue go! Basically, unwarranted compensation increases used up the majority of the revenue.
The Ontario Municipal Act bestows the power of ruling individual municipalities to the elected councillors. It also provides an obligation and duty on the councillors to utilize the resident taxpayer’s money in a manner that benefits the taxpayer. This has not been happening.
In the case of Ottawa, municipal councillors have disregarded their responsibility to the taxpayer and allowed others to control the spending of taxpayer’s money.
The current structure of control at the City Of Ottawa is as follows:
Unions
Senior Managers
City Councillors
The Ontario Municipal Act dictates the following structure:
City Councillors
Senior Managers
Unions
You will be hard pressed to ever hear the word “union” coming out of the mouths of our councillors or senior staff. You may hear that employee compensation is comparable to other Ontario jurisdictions, the arbitrators in Toronto settled outlandish wages for Ottawa union workers and the like.
You will not hear that 81 percent of all new revenue generated since amalgamation has been expensed for wage and benefits to City of Ottawa Union employees. The City of Ottawa is basically “stuck” in the year 2000 as the remaining balance of new revenue generated since amalgamation has, for the most part, only covered the additional inflationary cost of purchasing necessary materials used in maintaining the city infrastructure and other services.
The City of Ottawa's annual employee compensation expense is currently at the 1.1 billion dollar level. Property taxes account for approximately one billion of the total annual revenue of the City. A five percent resident property tax increase will not even cover employee compensation increases at the City of Ottawa in 2009. This is the problem the has to be resolved.
Most other Ontario municipalities have had a similar spike in compensation levels without comparative population growth. However, Ottawa’s compensation increase since 2001 to 2007 is by far the worst of similar sized jurisdictions in Ontario compared to revenue.
The problem does not belong only to Ottawa. It starts with the Ontario Government Public Sector salary policy. For example, you can recognize it in the illogical compensation increases for the Ontario Provincial Police.
Public sector workers have the greatest of job security and substantial wages and benefits above the private sector. Why? Because our elected politicians do not carry out their responsibility of controlling compensation levels in relationship to the majority of private sector workers. Period.
In Ottawa’s case, city councillors must take back the responsibility for controlling union employee compensation and make certain that it is on the basis of affordability of the resident taxpayers of Ottawa, not on compensation settlements in other Ontario communities.
Arbitrators in Toronto need to be re-educated. They have caused financial hardship on many municipalities in Ontario and have irresponsibly created the compensation “bubble” in Ontario municipalities. City councillors like the fact that they can blame the arbitrators, but it doesn't get the councillors off the hook. They are ultimately responsible for this mess.
The Unions will always take the best that they can get. In the present structure of wage negotiations, I don’t blame them. However, some sanity has to come into the equation.
The councillors have the choice now of reducing the workforce to save taxpayer money; restricting or roll-back wage and benefit increases; negotiate productivity improvements; closing "nice to have" departments and services and/or obtain additional revenue from the Provincial Government. The councillors must keep in mind that there is only one taxpayer.
Comments would be appreciated to:
wmomalley@gmail.com
Bill O’Malley
Ottawa
